I made a submission yesterday, saying (in slightly edited form, but only with regard to the detail of country-by-country reporting):

“I note the above consultation and offer comment here with regard to just one of the issues raised.

Questions 23 and 24 ask:

23. What are the key challenges preventing LICs and MICs from benefiting from trade?

24. What are the key constraints preventing trade and investment with LICs and MICs?

Data as a pre-requisite to trade

These questions raise many issues, but it is important to note that a pre-condition of trade is access to information on which decisions can be based. These include the decisions to:

Invest;

Advance credit;

Make pre-payment;

Assume delivery will take place;

Accept a guarantee;

Distribute products.

The listing is not exhaustive.

A due diligence based approach to data disclosure

In each case it is vital that, at a minimum, that information available on trading entities in the UK, including financial statements prepared in accordance with recognised financial reporting standards be available to the person making the decision. This is a state of (reasonable) financial transparency. We argue that financial transparency exists when the following information is readily available to all who might need it to appraise transactions they or others might undertake or have undertaken with another natural or legal person:

1. Who that other person is;

2. Where the person is;

3. What right the person has to enter into a transaction;

4. What capacity the person has to enter into a transaction;

And with regard to entities that are not natural persons:

5. What the nature of the entity is;

6. On whose behalf the entity is managed;

7. Who manages the entity;

8. What broad type of transactions the entity has entered into, and their scale;

9. Where it has entered into those transactions;

10. Who has actually benefited from the transactions;

11. Whether all reasonable obligations arising from the transactions appear to have been properly fulfilled.

Delivering data locally

There are a number of ways of securing this information. First, local registers holding this data on public record readily accessible via the internet should be created and it is a key role of the UK government to support this activity, in our opinion.

Delivering data internationally

Secondly, in the case of multinational corporations registered in states in which International Financial Reporting Standards issued by the International Accounting Standards Board apply this information should be supplied by incorporating country-by-country reporting in those standards for all large companies.

Country-by-country reporting is an entirely new perspective on corporate reporting. It can be seen as a requirement for increased disclosure of information in the financial statements of the largest multinational corporations, because it would require disclosure of the information noted here by each Multinational Corporation (MNC) in its annual financial statements.

The benefits of data – more trade

If this data were to be available in the accounts of multinational corporations then those proposing to trade with their subsidiaries in LICs and MICs could then:

Identify the subsidiary they were trading with and who owned it;

Secure the necessary financial data to assess the financial strength of that subsidiary and the implicit guarantee, if any, it enjoyed from its parent company;

Have the necessary confidence (or not) to trade with it.

The benefits of data – more investment

What it is vital to note in each and every case is that if more data is available to assess the risk involved in either trade or investment then that risk is necessarily reduced, not just specifically but, more importantly, generically. A generic reduction in risk will be reflected in a reduced cost of capital for companies in LICs and MICs and this will in turn be reflected in more inward investment in these locations.

Summary

It is for these reasons that we recommend that the delivery of enhanced transparency on trade in LICs and MICs, delivered both locally and internationally, be the basis for the UK’s policy for encouraging trade with LICs and MICs.”